STB Declines to Address Safe Harbor for Railroad Fuel Surcharges

Transportation Update

Date: September 04, 2019

On August 28, 2019, the Surface Transportation Board issued a decision in which it discontinued its proceeding in Rail Fuel Surcharges, Docket No. EP 661, which sought comment on whether the “safe harbor” provision of its current railroad fuel surcharge rules should be modified or removed. Although the STB received comments in this proceeding in 2014, it had not taken any action since then. In April 2019, the Western Coal Traffic League, an organization of electric utilities that rely upon rail transportation for coal movements, petitioned for a judicial writ of mandamus directing the STB to take action in this docket, which appears to have prompted this decision. The STB discontinued the proceeding because it has been unable to reach a majority decision on what action it should take and in the interest of administrative finality.

The STB’s inaction leaves shippers exposed to fuel surcharges that could substantially over-recover a railroad’s actual changes in fuel costs. In 2007, the STB prohibited fuel surcharges that collect more than the actual change in a railroad’s fuel costs as an unreasonable practice. In doing so, it also established a safe harbor insulating fuel surcharge programs that measure changes in fuel costs using the Energy Information Administration’s Highway Diesel Fuel Index from regulatory challenge because the STB concluded that this index accurately reflects the rail industry’s actual changes in fuel costs. However, in Cargill, Inc. v. BNSF Ry., NOR 42120 (served Aug. 12, 2013), the STB observed that BNSF’s fuel surcharge revenue from Cargill had exceeded its incremental fuel costs by $181 million, despite using the safe harbor index, which prompted the STB to solicit comment on whether to modify or remove the safe harbor. Because it has discontinued this proceeding, the safe harbor continues to protect railroads that use this index to calculate their fuel surcharges even when they substantially over-recover their actual incremental fuel costs.

Illustrating why they have been unable to reach a majority consensus, the three STB members submitted comments explaining their individual positions along with the decision. Chairman Ann Begeman indicated her desire to eliminate the safe harbor and said she had hoped to reach a consensus with the appointment of two additional Board members. Member Martin Oberman, despite finding the result in the Cargill decision “jarring,” expressed his belief that shippers should not be permitted to challenge a fuel surcharge independently of the overall transportation rate and stated that he would, therefore, overturn the STB’s 2007 decision prohibiting fuel surcharges that collect more than the actual change in a railroad’s fuel costs. Vice Chairman Patrick Fuchs echoed many of Oberman’s sentiments but said he could not support reversing the 2007 decision at this time, citing broad stakeholder reliance on current fuel surcharge rules. Instead, he stated that the STB should address fuel surcharge concerns through reforms to the rate review process for overall transportation rates.

FOR MORE INFORMATION

For more information, please contact:

Karyn A. Booth
202.263.4108
Karyn.Booth@ThompsonHine.com

Sandra L. Brown
202.263.4101
Sandra.Brown@ThompsonHine.com

Jeff Moreno
202.263.4107
Jeff.Moreno@ThompsonHine.com

David E. Benz
202.263.4116
David.Benz@ThompsonHine.com

Jason D. Tutrone
202.263.4143
Jason.Tutrone@ThompsonHine.com

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

© 2019 THOMPSON HINE LLP. ALL RIGHTS RESERVED.